Stiglitz, Roach, Huawu: economic recovery is premature

Joseph Stiglitznober Economics Prize winner, former chief economist of the World Bank (top) Dr Stephen Roach Morgan Stanley Asia Chairman (left) Huawu Nomura Securities managing director and head of Asian stock Bond Research Department (right) Moderator: China Securities news reporter Athena Chu stock market adjustment inevitable host: Mr Roach The world economy is now in the midst of the worst crisis and recession. Under this expectation, will our stock market performance eventually prove to be short-lived and unsustainable?　　In addition, there is a lot of debate about inflation and deflation. Dr Stephen Roach: The stock market has risen a little too fast. I am afraid it is too optimistic to overdraft the 2010 and 2011 economic recovery and corporate earnings, the stock market will adjust. For the next two months, this rebound is sure to shrink, and now I'm afraid it's starting to breed.　　The global economy will recover, but the recovery is likely to be much weaker than many hope. On inflation and deflation, I think the fear of high inflation is overdone. Recent figures in China and the United States suggest that we are facing a deflationary risk. Given this year's severe recession and the very weak economic recovery expected in the next two years, there is a huge gap between supply and demand in the economy. In this case, the likelihood of deflation is even greater.　　In other words, we need to close the gap and the gap before we have to worry about the inflationary pressures on the economy of current monetary policy and some of the economic policies that could lead to inflation. Huawu: The volatility of the stock market this year is inevitable, but the final key depends on the company's profitability, not just economic growth.　　Economic growth and profit growth are two different things.　　The global economic recovery is premature. Host: The world's stock markets have started to look up in the past two months, and is the global economy showing signs of recovery? Joseph Stiglitz: Now many people feel optimistic, under such circumstances, I think it is very likely that the present buds will turn yellow this summer.　　At least at the end of this year or next, and even by 2011, unemployment in the United States will rise, and the gap between potential capacity and actual output will continue to persist. Dr Stephen Roach: It's too early to start celebrating the global economic recovery. We are now mired in the deepest crisis of the Second World War. It will take time to recover from this huge crisis.　　This recession, compared with the first three recessions, shows that the current recession is unprecedented, both for GDP per capita, for industrial output, for global trade, and for rising unemployment. I would like to point out in particular that we expect global trade contraction to reach 11.8% this year. This could be the same as the worst annual decline in trade in the Great Depression of the the 1930s. During the Great Depression of the 30, the cumulative trade decline reached 60%. Especially for trade-led Asia and export-oriented China, this time it did bring hugeWar。　　The buds of recovery will slowly turn yellow, and may not blossom as the enthusiastic gardeners expect. Huawu: The adjustment process of the global economy will take some time, it is hard to say how long. Governments in developed countries have relatively limited policy strength. America's adjustment may be quicker, and America's economic recovery timetable may be better, and Europe will be worse off.　　Global equities have been in the doldrums for a while, but at the end of March the stock market was completely transformed and valuations were close to a reasonable level following the introduction of liquidity and central bank easing monetary policy. China's economy to achieve 7%-8% growth Moderator: China's economy can maintain a certain rate of growth? What are your forecasts for this year's economic growth?　　What kind of trend will the Chinese economy show? Dr Stephen Roach: China's exports accounted for a share of total GDP, rising from 20% in 2001 to 36% in 2007. This is because China's reliance on exports increased after 2001 years, making the huge global recession an external shock to China. The external shocks resulted in a sharp slowdown in China's growth at the end of last year and earlier this year.　　A challenge for China is to allow China's economic growth to move from export dependence to domestic consumption.　　The positive fiscal measures China has taken over the past few months, mainly by investing in infrastructure to stimulate economic growth, hope that this support can temporarily revive the Chinese economy and then look forward to a rapid rebound in the world economy, which will provide support for China's exports to resume growth quickly. This kind of positive fiscal measure may make 2009 economy achieve about 7%, the 8% increase is higher than I expected a few months ago, but by 2010 there could be a setback and the global economy might still be in a weak position, and there is no way to provide external demand support to China's export-driven economy.　　As a result, the stakes are very high. Given that China's expected economic growth in 2009 is likely to be weaker than expected in 2010 years, it is too early to say that the Chinese economy has rebounded in the "V" word.　　I think the structure of China's economy is more likely to be close to the "W" shape. Huawu: Our view of China is very clear, is already bottomed out, many policy effects in the second quarter will be more clearly reflected, we believe that China's economic growth can reach 8%, 2010 will reach 8.5%.　　So we are more worried about overheating. Foreign capital divestment has little influence on China host: Some big institutions are affected by the financial crisis, withdrawing capital from China.　　For example, the Bank of America has sold the assets of its CCB holdings, and how to look at future financial institutions ' strategies for emerging markets? Dr Stephen Roach: Indeed, the crisis is devastating for many financial institutions. Bank of America did sell a substantial portion of their investment in CCB. But they still kept two-thirds of the original investment. I think they still maintain a large proportion of their original investment, which shows that heA long-term commitment to China. All the big financial institutions that are now mired in crisis are probably re-examining their priorities and core competencies. It is true that some financial institutions are too open in emerging markets, whether in Asia, South America, Central Europe or Eastern Europe, and now they need to withdraw capital from these markets so that their balance sheets reach the more secure levels required by their own regulators. But we cannot think of this as a reduction in their commitment to China's development.　　This may just be a rearrangement of the capital arrangements and priorities of the financial institutions affected by the financial crisis. Joseph Stiglitz: Developing countries are the most likely to be hit by the crisis, and many countries are hit hard by capital outflows, shrinking trade, falling commodity prices and reduced remittances, and there is not much resources for developing countries to launch stimulus programs as big as the US.　　On the contrary, China is an exception, and China's stimulus package and China's GDP share is not inferior to any country. Many countries have secured their own assets, including the developed world's desire to make bank guarantees, but the credibility of the guarantee cannot be guaranteed by the Government.　　That's why capital flows back to America. The crisis has also brought good news, as the group of eight knows that it cannot solve the problem on its own, and that it must involve emerging economies. This is a change that has long been needed, and the group of Eight has become a group of 20, but the solutions they have put forward are problematic. Moreover, this is a global crisis, and global crises need to be addressed globally. But with the development of economic globalization, its speed is far more than the speed of political globalization.　　So the prospect of a fast recovery in the global economy is bleak. When will the recovery be launched after the financial crisis? What new life and opportunities will be sprouting? This round table brings together three economists from the United States, including Nobel laureate Professor Joseph Stiglitz, a Columbia University professor and former World Bank chief economist, Morgan Stanley Asia chairman Dr Stephen Roach has long served as chief economist at JPMorgan, and a former Yale University professor of Finance, Nomura International managing director and head of Asian stock bond research, HUAWU